Chapter 2.1- Earned Income and Benefits Minimum Wage- lowest pay rate allowed by law for each regular hour of work. -

$7.80 for Montana $8.00 for California

8 hr a day, 40 hours a week is a traditional work week. Overtime pay- pay received for hours worked in addition to regular hours. -

Must be 1.5 times regular pay. May receive extra pay if work on a holiday

Salary- A set amount of money paid weekly, monthly, or yearly. -

More flexible No time cards Usually managers and supervisors.

Tip- gift of money, often a percentage of the total bill -

Are subject to federal taxation.

Commission- set fee of percentage of a sale paid to an employee instead of or in addition to salary or wages. -

Receive a percentage when a sale is made. Real estate/ The Buckle/ Car Salesman Some work just on commission- some work on wages plus commission.

Entrepreneur- person who takes the risks of being self- employed and owning a business Advantages -

You make the decisions about the business. Products/ hours of operation. Freedom to set your own hours. Keep profit of business

Disadvantages -

If it fails your money is lost

Questions to ask yourself if you want to start your own business 1. Are you self- motivated? 2. Do you like people?

3. Are you a leader? 4. Do you take responsibility? 5. Are you organized? 6. Do you work hard? 7. Do you make decisions quickly and easily? 8. Are you trustworthy? 9. Are you persistent? 10. Do you keep good records? Business plan- document that describes the steps that will be taken to open and operate a business

Benefits Benefits- forms of pay other than salary or wages -

Paid vacation or holidays Health insurance

Cafeteria plan- benefit plan that allows workers to choose from a number of options. Disposable income- money available to spend or save after taxes have been paid. -

Benefits increase the total disposable income. Less money you have to spend. Health insurance through work may be cheaper than if you were to purchase it. Not taxed on most

Pay without work- times when an employee is paid when they do not work -

Sick leave, paid vacation, paid holiday

Sick leave- paid time away from work due to an illness Personal Leave- paid time away from work for personal reasons. Education- pays for you to continue your education Perks- emotional satisfaction or social status rather than money -

Parking spot Company vehicle Office with a view

Health Insurance Disability insurance- payments to replace income lost when illness or injury prevents them employee from working. Workers Compensation- insurance plan that employers are required by law to provide form employees. It pays medical and disability pay due to injury on the job. Retirement plan- an account into which employees contribute a portion of their earnings for their retirement. Employers may match the contributions. Profit- Sharing plan- benefit wherby employees may share in the profits of the business. Stock Option plan- all employees to buy stock at a reduced price. Health spending account- set aside money to pay for qualified medical expenses.

2.2 Unearned Income and Payments Unearned income- money received from sources other than working Interest- money earned on savings accounts and other funds Dividends- portion of a corporation’s profits distributed to stockholders -

Cash dividend Stock dividend

Gambling, Social Security, Pensions, Annuities In-cash payment- money in the form of check, debit card, or other direct payment given to a person needing assistance -

After Hurricane Katrina people given debit cards to help.

In- Kind payments- payments made indirectly on a person’s behalf or in a form other than money. -

Food stamps, rent subsidies, vouchers

Taxes---------------------------------------------------------Direct taxes- pay directly to the government Indirect taxes- charged on goods or services. (paid by you to the business then goes to gov.) Use taxes- taxes based on the use of goods and services provided by the gov. -

Nation park (pay for operation of the park) Gasoline (Help pay for roads)

Excise taxes- taxes charged on the purchase of specific goods and services. Sales Taxes- taxes levied on consumer purchases of goods and services -

Added to the price of your purchase. o Regressive tax- takes a larger percentage of income from lower income people than from higher income. Price of product is the same regardless of income level.

Income tax- paid on earned and unearned income. Paid directly to gov. Property tax- wealth taxes based on the assessed value of owned real estate. -

Based on assessed value—determined by county or other taxing authority Market Value- highest price in which the property would sell.

Direct benefits Public goods- gov provided goods and services paid for by taxes. -

National defense Public education Police protection National parks Roads

Unique qualities 1. Everyone benefits from them 2. No one can be excluded 3. People do not benefit in direct proportion to taxes paid. Indirect Benefits- You may not directly be benefits Ex.- Because people get vaccinated, you do not get sick---Education creates higher quality work force.

2.3 Taxes and other deductions Gross Pay- total salary or wages earned during the pay period. Net Pay- The amount of your paycheck after deductions (take home pay) Federal and state income taxes are withheld according to the amount of income and the number of exemptions claimed on the form w-4 Exemption- a person claimed as a dependent on a tax return Dependent- a person who depends on you from more than half of his their support -

Minors Themselves )unless claimed by someone else

Social Security tax- a withholding tax to provide old- age, survivors, and disability insurance Medicare tax- a tax that pays for medical care for retired persons FICA Workers Compensation- an insurance plan that pays medical and disability benefits to workers injured on the job Optional Deductions -

Health insurance, life insurance, dental, vision, flex, savings plan, retirement plan,

Forms that must be filled out W2- a form used to report taxable income a worker received during the calendar year -

Provided by employer

Form 1040EZ- short tax return form designed for single and joint filers with no dependents or itemized deductions Form 1040A- two page form that allows more options form income and deductions to be entered. -

More than $1,500 in interest

E Filing- Taxes filed online -

Receive money faster.